ECO/365T: Principles Of Microeconomics - WEEK 1

Cindy runs Cindy's Cupcake Shop. She has decided to charge $3 for a gourmet cupcake. She knows the individual demand schedules (shown below) for five of her customers. What is the market demand that Cindy will face for her five customers, if she charges $3 a cupcake? Demand by Customer (Quantity of Cupcakes) Price Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 $2 4 8 5 10 8 $3 3 6 3 4 5 $4 2 4 1 2 2 $5 1 2 0 0 1 -11 cupcakes -14 cupcakes -9 cupcakes -21 cupcakes

21 cupcakes

Select all that apply Which of the following would be considered nonprice determinants of the demand for flour? Multiple select question. -A change in consumer preferences to bake -A change in buyers' expectation of the price of flour next week -A change in the number of buyers of flour -A change in the wages of farm workers, an input into the production of flour -A change in sellers' expectation of the price of flour next week

A change in consumer preferences to bake A change in buyers' expectation of the price of flour next week A change in the number of buyers of flour

The government decides to implement a tax on turnips. What will be the effect on the turnip market? Multiple choice question. -A change in resource cost -A change in supply -A change in the quantity of workers -A change in demand

A change in supply

What is the effect of a subsidy being placed on the market? Multiple choice question. -An increase in technological advances -An increase in government revenue -A decrease in the cost of production -A decrease in buyers' willingness to purchase the product

A decrease in the cost of production

Which of the following would shift the supply curve for guitars? Multiple choice question. -A change in the price of saxophones, a substitute in consumption -A tax is implemented on guitars -A change in the number of buyers -A change in the price of guitars

A tax is implemented on guitars

Which of the following events would increase the cost of production? Multiple choice question. -A tax is placed on the market. -A technological advance improves the production process. -A subsidy is placed on the market. -Resource prices fall.

A tax is placed on the market.

Which of the following is a possible outcome if a nonprice determinant of supply changes? Multiple select question. -An increase in supply at all possible prices -A decrease in supply at all possible prices -A decrease in the quantity supplied -An increase in the quantity supplied

An increase in supply at all possible prices A decrease in supply at all possible prices

__________is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at large. (Enter one word in the blank.)

Economics

__________ ability is the ability and vision to combine land, labor, and capital into a productive process, taking on the risks and rewards that are inherent in any new venture. (Enter one word in the blank.)

Entrepreneurial

Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week? Multiple choice question. -One movie -$5 -Five songs -One movie and five songs

Five songs Reason: By choosing to see a movie this week, Martin gives up the 5 songs he could have bought instead.

Select all that apply Which of the following are reasons the demand curve is downward sloping? (Select all that apply) Multiple select question. -Marginal effect -Income changes -Income effect -Price effect -Diminishing marginal utility -Substitution effect

Income effect Diminishing marginal utility Substitution effect

Which of the following correctly states the three main reasons the demand curve is downward sloping? Multiple choice question. -Marginal benefit, purchasing power, and substitutes -Marginal cost, complements, and purchasing power -Marginal benefit, marginal cost, and number of buyers -Substitutes, complements, and number of buyers

Marginal benefit, purchasing power, and substitutes

______________typically deals with individual households and markets - such as the market for gasoline. (Enter one word in the blank)

Microeconomics

__________is a branch of economics that typically deals with how prices are determined in markets and how markets adjust to a variety of different events.

Microeconomics

Money spent by a firm on machinery that is designed to improve future productivity is called: Multiple choice question. -labor. -entrepreneurship. -human capital. -physical capital.

Physical Capital

Labor as a resource is defined as all_________ and __________activity devoted to producing goods and services. (Use one word for each blank.)

Physical and Mental

Use your knowledge of relative scarcity to rank the following items from least scarce (top) to most scarce (bottom):

Salt water Drinking water Diamonds

____________ means that resources are limited.

Scarcity

How is the market supply of a good or service calculated? Multiple choice question. -Summing the total revenue and subtracting the total costs of production. -Summing the price of each unit of output for all sellers within the market. -Summing the quantity produced by all sellers at every price within the market. -Summing the cost of production for all sellers within the market.

Summing the quantity produced by all sellers at every price within the market.

Which of the following are reasons for the demand curve sloping downward? Multiple select question. -The consumer effect -Increasing marginal cost -The income effect -Diminishing marginal utility -The substitution effect

The income effect Diminishing marginal utility The substitution effect

Which principle states that as the price of a good increases the quantity supplied will increase? Multiple choice question. -The law of increasing quantity -The law of increasing opportunity cost -The law of supply -The law of demand

The law of supply

Every person's and - ultimately - every economy's standard of living depends on the effective use of resources. Multiple choice question. -False -True

True

Clara can spend her afternoon doing one of three things: She can study economics, plant a sapling in her garden, or wash her car. Suppose she values spending time in the garden most; next her time washing the car; and her time studying economics the least. What is the opportunity cost of planting a garden? Multiple choice question. -Washing her car -Studying economics -Deciding what to plant in the garden -Planting her garden

Washing her car

In economics, a downward-sloping or upward-straight line is often called: Multiple choice question. -a linear object. -an equation. -an expected relationship. -a curve.

a curve.

The supply curve will shift to the right or left when: Multiple choice question. -the quantity changes. -the price changes. -a non-price determinant of supply changes. -a non-price determinant of demand changes.

a non-price determinant of supply changes.

Because the world is characterized by scarcity, people must choose between different uses for the resources at their disposal. In economics, we refer to this as: Multiple choice question. -exhausting resources. -common resources. -allocating resources. -spending resources.

allocating resources.

At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skating park and building an arboretum. This is known as the problem of: Multiple choice question. -eliminating scarce resources. -locating scarce resources. -overusing scarce resources. -allocating scarce resources.

allocating scarce resources.

Individuals and businesses must choose between the different uses for their available resources. This is called ______ resources and is due to the concept of ______. Multiple choice question. -allocating; scarcity -producing; scarcity -exchanging; opportunity cost -scarcity of; production

allocating; scarcity

An inferior good has: Multiple choice question. -an inverse relationship between demand for the good and income. -a direct relationship between demand for the good and income. -an inverse relationship between demand of the good and price. -a direct relationship between demand of the good and price.

an inverse relationship between demand for the good and income.

The demand schedule represents the relationship between the prices of a good, service, or resource: Multiple choice question. -and the quantity that individuals and firms are willing and able to buy, all else held constant, as a curve. -and the quantity that individuals and firms are willing and able to sell, all else held constant, in a tabular form. -and the quantity that individuals and firms are willing and able to sell, all else held constant, as a curve. -and the quantity that individuals and firms are willing and able to buy, all else held constant, in a tabular form.

and the quantity that individuals and firms are willing and able to buy, all else held constant, in a tabular form.

The law of demand states that: Multiple choice question. -as the quantity of a good, service, or resource rises; the price demanded will rise, all else held constant. -when more people want a good, service, or resource, more of it will be produced. -as the use of a good, service, or resource expands; the quantity demanded will rise, all else held constant. -as the price of a good, service, or resource falls; the quantity demanded will rise, all else held constant.

as the price of a good, service, or resource falls; the quantity demanded will rise, all else held constant.

The law of demand states that: Multiple choice question. -as the demand for a good, service, or resource rises, the price will fall, all else held constant. -as the price of a good, service, or resource rises, the quantity demanded will fall, all else held constant. -as the price of a good, service, or resource rises, the quantity demanded will rise, all else held constant. -as the price of a good, service, or resource falls, the quantity demanded will fall, all else held constant.

as the price of a good, service, or resource rises, the quantity demanded will fall, all else held constant.

When you plot the data from the demand schedule on a graph, the result is called the demand ____________ .

curve, line, or function

Market _____________ is based on the overall preferences of consumers in the market.

demand

A graphical representation of the relationship between the price of a good, service, or resource and the quantity that individuals and firms are willing and able to buy, all else held constant, describes the: Multiple choice question. -demand schedule. -demand curve. -market curve. -price schedule.

demand curve.

A normal good, as opposed to an inferior good, is a good for which: Multiple choice question. -the law of demand does not apply. -demand increases as income increases. -demand decreases as income increases. -the law of demand applies.

demand increases as income increases.

Tastes and preferences, the number of buyers, and buyer expectations are all nonprice determinants of _____________. (one word)

demand or market demand

A tabular representation of the relationship between the price of a good, service, or resource and the quantity that individuals and firms are willing and able to buy, all else held constant, describes the: Multiple choice question. -demand concept. -demand schedule. -demand curve. -demand table.

demand schedule.

In economics - resources can also be called Multiple choice question. -production possibilities. -factors of profit. -factors of production. -marginal resources.

factors of production.

The horizontal summation of individual demand curves: Multiple choice question. -is the quantity demanded. -gives the market demand curve. -is the same as averaging them. -cannot be done.

gives the market demand curve.

The law of supply tells us that: Multiple choice question. -higher prices of goods result in higher quantities of goods being demanded. -lower prices of goods result in higher quantities of goods being demanded. -higher prices of goods result in higher quantities of goods being supplied. -lower prices of goods result in higher quantities of goods being supplied.

higher prices of goods result in higher quantities of goods being supplied.

Economics is about: Multiple choice question. -the various types of insurance people can purchase. -how people get wealthy. -the ways in which consumers and producers negotiate. -how people make choices in a world of scarcity.

how people make choices in a world of scarcity.

Suppose a firm spends $10,000 to train its employees on a new, company-wide software program that it has already purchased and intends to adopt in the following month. In this case, the knowledge gained through the training is considered: Multiple choice question -physical capital. -entrepreneurship. -natural resources. -human capital.

human capital.

Suppose you have $30 to spend on tacos each week. When the price of tacos decreases from $3.00 to $2.00, the purchasing power increases from 10 tacos per week to 15 tacos per week. This increase in the quantity of tacos demanded illustrates the ___________ effect.

income

A tax on producers: Multiple choice question. -increases the cost of producing. -lowers the price. -increases the quantity. -decreases the cost of producing.

increases the cost of producing.

On the supply side of the market, when the price of a good increases, the quantity supplied of the good ____________. (Enter one word in the blank.) Need help? Review these concept resources.

increases, rises, increase, or rise

On the supply side of the market, when the price of a good increases, the quantity supplied of the good: Multiple choice question. -decreases. -increases. -does not change.

increases.

On the supply side of the market, when the price of a good increases, the quantity supplied of the good: Multiple choice question. -does not change. -decreases. -increases.

increases.

According to the law of supply, as price ________, quantity supplied ________. Multiple choice question. -decreases; increases -increases or decreases; does not change -increases; decreases -increases; increases

increases; increases

A good for which there is an inverse relationship between the demand for the good and income is a(n) _____________ (one word) good.

inferior

A good for which there is an inverse relationship between the demand for the good and income is a(n) _______________ (one word) good.

inferior

For ________________ (one word) goods, an increase in income decreases demand, and a decrease in income increases demand.

inferior

A subsidy: Multiple choice question. -is a benefit given by the government to individuals or businesses. -is a tax levied on the sale of specific types of assets such as stocks, bonds, and real estate. -is a payment that one country voluntarily makes to another. -is a tax on the purchase of a good or a service.

is a benefit given by the government to individuals or businesses.

Wind energy is relatively _____________ (less/more) scarce than coal. (Choose the answer from the ones given in the parentheses.)

less

When the price of a good rises, we can expect that: Multiple choice question. -the good will be in short supply. -people will want more of the good. -the market will be disrupted. -less of the good will be purchased.

less of the good will be purchased.

The sum of individual supply curves added together reflect the ______________ supply curve.

market

The _______________ (one word) demand represents the horizontal summation of individual demand curves.

market or aggregate

A good for which there is a direct relationship between the demand for the good and income is a(n) _________ good (one word).

normal

Firms will be willing and able to produce more output only when prices rise, because the _______________ cost of production is rising. (Enter one word in the blank.)

opportunity

Spending more money on one thing means that you have less money to spend on something else. This is called ______ cost. Multiple choice question. -fixed -opportunity -sunk -average

opportunity

Firms will be willing and able to produce more output only when prices rise because the: Multiple choice question. -opportunity cost of production is decreasing. -consumer demand is increasing. -marginal cost is decreasing. -opportunity cost of production is increasing.

opportunity cost of production is increasing.

The perceived desirability of consuming a good, service, or resource refers to the tastes and ____________ of buyers. (Enter one word in the blank.)

preferences or preference

The income effect is the effect that a change in the: Multiple choice question. -price of one good, service, or resource has on the demand for another. -quantity of one good, service, or resource has on the price of another. -price of a good, service, or resource has on the purchasing power of income. -quantity of a good, service, or resource has on the purchasing power of income.

price of a good, service, or resource has on the purchasing power of income.

When the price of a good or service decreases: Multiple choice question. -quantity demanded increases. -quantity demanded decreases. -demand increases. -demand decreases.

quantity demanded increases.

Any change in technology and the availability and the quality of resources are likely to affect _________ the that producers are willing and able to supply to the market at every price.

quantity or amount

Any change in the availability and quality of resources and technology will likely affect the: Multiple choice question. -quantity producers are willing and able to supply to the market at every price. -quantity consumers are willing and able to purchase at every price. -existence of taxes and subsidies in the market. -quality and regulation of the product.

quantity producers are willing and able to supply to the market at every price.

When we talk about the demand for sunglasses, we are referring to the: Multiple choice question. -quantity of sunglasses that people bought this year at the current price. -quantity of sunglasses that people are buying today at the current price. -quantity of sunglasses that people bought last year at the current price. -quantity that consumers are willing and able to buy at a variety of different prices, all else held constant.

quantity that consumers are willing and able to buy at a variety of different prices, all else held constant.

There is an inverse relationship between price and ____________ demanded. (Enter one word in the blank.)

quantity, amount, or product

There is an inverse relationship between price and ______________ demanded. (Enter one word in the blank.)

quantity, amount, or product

The comparison of the scarcity of one good, service, or resource to that of another is called " ______________ scarcity." (Enter just one word in the blank.)

relative

Tomatoes represent a small subset of food, so tomatoes are: Multiple choice question. -as scarce as food in general. -as abundant as food in general. -relatively less scarce than food in general. -relatively more scarce than food in general.

relatively more scarce than food in general.

Every person's and every economy's standard of living relies on the effective use of _______________ . (Enter one word in the blank.)

resources

Inputs used to produce goods and services are: Multiple choice question. -services. -products. -goods. -resources.

resources.

The supply curve in the current period will shift to the: Multiple choice question. -right when producers expect lower prices in the future. -right when producers expect higher prices in the future. -left when producers expect lower prices in the future. -left when consumers expect higher prices in the future.

right when producers expect lower prices in the future.

Economics is the study of how individuals and societies allocate __________ resources among many competing uses. (Use one word for the blank.)

scarce

Since Chevrolet Camaros represent a small subset of all automobiles in existence, they are relatively more: Multiple choice question. -popular than automobiles in general. -scarce than automobiles in general. -abundant than automobiles in general. -reliable than automobiles in general.

scarce than automobiles in general.

Due to the ______ of natural resources, we cannot have all the housing and all the forests we may want. (Use one word for the blank.) Multiple choice question. -supply -demand -scarcity -abundance

scarcity

Economics studies how individuals and businesses make decisions in a world________________of resources. (Enter one word in the blank.)

scarcity

To simplify analysis in economics, supply curves are often drawn as: Multiple choice question. -sloping lines. -inverted U-shaped curves. -vertical lines. -horizontal lines.

sloping lines.

A(n) ___________ to producers lowers the cost of producing. (Enter one word in the blank.)

subsidy or subsidies

A payment made by the government that does not necessarily require an exchange of economic activity in return is called a: Multiple choice question. -subsidy. -substitute. -purchase. -tax.

subsidy.

The law of ____________ tells us that higher prices result in higher quantities being supplied.

supply

When the number of sellers decreases,: Multiple choice question. -supply decreases. -demand decreases. -supply increases. -demand increases.

supply decreases.

A change in taxes and subsidies on producers alters market _______________.

supply, efficiency, price, or prices

The perceived desirability of consuming a good, service, or resource is the: Multiple choice question. -only important determinant of price. -tastes and preferences of buyers. -unknown aspect of the market. -tastes and preferences of sellers.

tastes and preferences of buyers.

A payment made to the government that is the result of economic activity is called a _____________ . (Use one word for the blank.)

tax, taxation, or taxes

Select all that apply The demand curve for a normal good is downward sloping because Multiple select question. -the benefit of consuming more of a good falls with each additional unit, so the price consumers are willing and able to pay also falls with increased consumption. -the benefit of consuming more of a good rises with each additional unit, so the price consumers are willing and able to pay also falls with increased consumption. -as prices rise, the purchasing power of each dollar earned falls, and consumers are willing and able to buy more of a good. -as prices rise, the purchasing power of each dollar earned falls, and consumers are willing and able to buy less of a good. -when consumers purchase substitutes, the quantity demanded of the good falls. -when consumers purchase substitutes, the quantity demanded of the good rises.

the benefit of consuming more of a good falls with each additional unit, so the price consumers are willing and able to pay also falls with increased consumption. as prices rise, the purchasing power of each dollar earned falls, and consumers are willing and able to buy less of a good. when consumers purchase substitutes, the quantity demanded of the good falls.

If there is a change in a nonprice determinant of demand for a good,: Multiple choice question. -the good will have a higher rate of diminishing marginal utility. -the demand curve shifts. -there is a movement along a demand curve. -the quantity supplied at each price level will change.

the demand curve shifts.

When considering how changes in tastes and preferences or demographics affect demand, we tend to evaluate: Multiple choice question. -changes in quantity demanded. -the individual market -the supply side of the market. -the entire market.

the entire market.

A tax is a payment made to: Multiple choice question. -the government that is not the result of economic activity. -another individual that is the result of exchange. -the government that is the result of economic activity. -another business that is the result of exchange.

the government that is the result of economic activity.

The market demand represents: Multiple choice question. -the division of individual demand curves. -the horizontal summation of individual demand curves. -the maximum amount for sale. -the average of individual demand curves.

the horizontal summation of individual demand curves.

The overall or total demand for a good, service, or resource is: Multiple choice question. -the market demand. -unavailable information. -the same as supply. -the individual demand.

the market demand.

Other things held constant, the demand curve will shift when: Multiple choice question. -the prices of inputs used in production increase. -supply changes. -the price of the good changes. -the nonprice determinants of demand change.

the nonprice determinants of demand change.

As the price of a good, service, or resource rises: Multiple choice question. -the quantity demanded will fall. -the quantity demanded will rise. -the quantity produced will remain the same. -the quantity produced will fall.

the quantity demanded will fall.

According to the law of supply, as the price of a good, service, or resource rises: Multiple choice question. -the quantity supplied will increase - and vice versa - all else held constant. -the quantity demanded will increase - and vice versa - all else held constant. -the quantity supplied will decrease - and vice versa - all else held constant. -the quantity demanded will decrease - and vice versa - all else held constant.

the quantity supplied will increase - and vice versa - all else held constant.

Opportunity cost is defined as: Multiple choice question. -the expected value of buying a good or a service. -the marginal benefit minus the marginal cost. -the value of the opportunity that you give up when you choose one -activity instead of another. -the financial cost of purchasing a good or a service.

the value of the opportunity that you give up when you choose one activity instead of another.

Because resources are scarce Multiple choice question. -they do not need to be allocated between competing uses. -they tend to be owned by one large entity. -producers and consumers can always satisfy their unlimited wants. -they must be allocated between competing uses.

they must be allocated between competing uses.

The income effect, the substitution effect, and diminishing marginal utility together explain: Multiple choice question. -why demand curves are downward-sloping. -the importance of prices. -why demand curves exist. -how markets function.

why demand curves are downward-sloping.

The income effect, the substitution effect, and diminishing marginal utility together explain: Multiple choice question. -why demand curves exist. -how markets function. -why demand curves are downward-sloping. -the importance of prices.

why demand curves are downward-sloping.

The income effect, the substitution effect, and diminishing marginal utility explain: Multiple choice question. -why the price tends to be in equilibrium. -why the quantity demanded will fall when prices rise. -why the quantity demanded will rise when prices rise. -why the quantity demanded will fall when prices fall.

why the quantity demanded will fall when prices rise.